- Wondering if Netflix at around US$92.97 is a bargain or a trap? This article breaks down what that price really implies about the business.
- The stock has been relatively flat over the last year with a return of around a 0.3% decline, while the 3 year return of 166.9% and 5 year return of 72.0% show how different the picture can look over longer periods.
- Recent coverage around Netflix has focused on its position as a major streaming platform and how shifts in subscriber expectations, competition and content spending are shaping sentiment. These themes help frame why short term moves like the 0.4% decline over 7 days and 3.4% decline over 30 days may not tell the whole story on value.
- Netflix currently holds a valuation score of 3 out of 6. The sections ahead will compare what different valuation methods suggest about the stock and will finish with a more holistic way to think about what that score really means for you.
Find out why Netflix's -0.3% return over the last year is lagging behind its peers.
Approach 1: Netflix Discounted Cash Flow (DCF) Analysis
A Discounted Cash Flow, or DCF, model takes projections of a company’s future cash flows and discounts them back to today using a required return, giving an estimate of what the business may be worth right now.
For Netflix, the model used is a 2 Stage Free Cash Flow to Equity approach, based on its latest twelve month free cash flow of about US$9.6b. Analysts and extrapolations point to projected free cash flow of US$22.3b by 2030, with intermediate estimates between 2026 and 2035 ranging from roughly US$11.6b to US$29.8b, all in US$. Simply Wall St only uses analyst inputs where available, then extends the projections for later years.
When all those future cash flows are discounted back, the resulting intrinsic value from this DCF comes out at around US$84.38 per share. Against the current share price of about US$92.97, the model implies the stock is 10.2% overvalued based on these assumptions and projections.
Result: OVERVALUED
Our Discounted Cash Flow (DCF) analysis suggests Netflix may be overvalued by 10.2%. Discover 62 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Netflix Price vs Earnings (P/E)
For a profitable company like Netflix, the P/E ratio is a useful shorthand because it links what you pay per share directly to the earnings that the business is already generating. It gives you a quick sense of how much the market is paying for each dollar of profit.
What counts as a "normal" P/E depends a lot on growth expectations and risk. Higher expected earnings growth or lower perceived risk can support a higher P/E, while slower growth or higher risk usually point to a lower, more conservative multiple.
Netflix currently trades on a P/E of 35.75x. That sits slightly above the Entertainment industry average of about 34.78x, and below the broader peer group average of 55.62x. Simply Wall St’s Fair Ratio for Netflix is 36.10x, which is a proprietary estimate of the P/E that might be reasonable given factors such as its earnings growth profile, industry, profit margins, market cap and company specific risks.
The Fair Ratio can be more useful than a simple peer or industry comparison because it attempts to adjust for those company specific drivers rather than assuming one size fits all. With the actual P/E of 35.75x very close to the Fair Ratio of 36.10x, the stock looks priced at about the level you might expect based on these inputs.
Result: ABOUT RIGHT
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.
Upgrade Your Decision Making: Choose your Netflix Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so this is where Narratives come in as a simple way for you to connect your view of Netflix’s business with specific forecasts and a Fair Value, rather than relying only on one model or ratio.
A Narrative on Simply Wall St is essentially your story for a company written in numbers and plain language. You spell out what you think is happening with things like subscribers, content choices, margins, risks and opportunities, then tie that directly to your own revenue, earnings and cash flow estimates and the Fair Value that falls out of those assumptions.
This makes Narratives a practical bridge between Netflix’s story and a valuation. Once you have a Fair Value estimate, you can compare it with the current share price to decide whether the stock at around US$92.97 looks expensive or cheap relative to your view, without needing to build spreadsheets from scratch.
Narratives on Simply Wall St sit inside the Community page and update automatically as new data arrives. When fresh earnings, news or guidance change the inputs, the Fair Value and the supporting charts refresh too, keeping your Netflix thesis current without extra work on your side.
Importantly, different investors can look at the same stock and arrive at very different but clearly explained Narratives. For example, one values Netflix at about US$79.39 per share with a focus on cost of capital and multiple methods, another lands closer to US$149.37 based on margin expansion and AI driven efficiencies, and a third is nearer to US$936 that leans heavily on ad tiers and operating leverage, giving you a transparent range of perspectives to compare with your own.
For Netflix however we will make it really easy for you with previews of two leading Netflix Narratives:
Each one takes the same company and the same share price of about US$92.97 and arrives at a very different idea of what long term value could look like. Your job is not to pick the one that sounds best, but to see which assumptions feel closest to how you think Netflix actually runs its business.
Fair Value: US$797.74 per share
Implied discount to this Fair Value: about 88.3% undervalued versus the current US$92.97 share price
Revenue growth used in this Narrative: 13%
- The author expects consolidation in streaming and Netflix’s scale to give it better bargaining power on content, while ad plans and paid sharing support both subscriber and revenue growth.
- Average Revenue Per Member is assumed to trend higher over time through price increases and advertising, while tighter control of content and operating costs supports higher net margins and cash flows.
- The Narrative explicitly weighs risks such as writer and actor strikes, global competition and execution on new initiatives, but still arrives at a high Fair Value based on continued member growth and margin expansion.
Fair Value: US$82.54 per share
Implied premium to this Fair Value: about 12.6% overvalued versus the current US$92.97 share price
Revenue growth used in this Narrative: 10.03%
- This view puts more weight on rising content spend, regulatory pressures and competing forms of entertainment, which together are seen as a drag on long term margins and earnings power.
- Even though the bearish analyst cohort still uses solid revenue and earnings growth assumptions, it assumes that Netflix’s P/E multiple compresses over time as competition and streaming fatigue weigh on sentiment.
- The Narrative highlights that analysts are not uniform, with a wide spread of price targets, and frames the bearish Fair Value as requiring you to believe that the current market expectations are too optimistic.
Seen side by side, these Narratives show how two sets of reasonable assumptions around growth, margins and required returns can justify very different Fair Values for the same US$92.97 share price. Your own view on Netflix will sit somewhere along this spectrum, so the useful next step is to pressure test which inputs you agree or disagree with most strongly and build from there.
To see the full set of community Narratives and how they tie into valuation, risks and growth expectations for Netflix, use the Community page as a single place to compare different theses in detail and decide which one best matches your own reasoning.
Do you think there's more to the story for Netflix? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com